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6.1.C. - Page 49 (b) Adopting a defined contribution pension plan for new emplovees. As noted in BACKGROUND (page 4), defined contribution (as opposed to defined benefit) plans such as 401k plans relieve municipalities of the risks and uncertainties of below -projected investment returns and other assumptions about the future (for example, mortality rates). A large percentage of private companies have now adopted this approach184 but they may be compensating for this, at least in part, with salaries that are greater than public agency salaries. As of 2009, only 7 percent of private -sector employees had their sole pension plan in the form of a defined benefit plan, down from 62 percent in 1975.185 The Cities could achieve much greater certainty with respect to future pension costs if they could switch to a defined contribution plan for new employees. However, Ca1PERS does not currently offer defined contribution plans as an option for its member agencies and it requires that all new employees of the member Agencies participate in Ca1PERS' pension plans. 186 As a result, the Cities could only offer defined contribution plans to new employees in addition to, rather than in place of, existing pension plans with the result that defined contribution plans would increase, rather than reduce, overall costs for the Cities. In addition, offering only defined contribution plans could put the Cities at a significant employee recruiting and retention disadvantage compared to private industry unless the Cities increased salaries to rates more competitive with private industry. (c) Withdrawing from Ca1PERS. Several cities have considered the possibility of withdrawing from Ca1PERS altogether in order to have more flexibility and visibility into their future pension costs. However, Ca1PERS' termination payment requirements are prohibitive. 187 The City of Palo Alto determined that, in order to leave Ca1PERS, it would first need to "immediately deposit" in excess of $1 billion to the Ca1PERS Pension Trust, and then establish a new deferred compensation plan for employees. 188 A City of San Carlos official advised the Grand Jury that withdrawal from Ca1PERS is effectively "impossible" because of the high termination fees imposed by Ca1PERS. Conclusion. Most of the Cities do not yet appear to have adopted a long-term financial plan to address their rising pension costs. They have not adopted target Funded Percentages for their plans, dates for achieving them, or plans for monitoring progress against their targets. Thus far, they have not made it a priority to provide clear, regular and public disclosure to their residents of their future projected pension costs and Unfunded Liabilities, nor the cuts in services that they will make, or lag Since 1980, when participation in defined benefits plans was at its peak in the United States, 30.1 million people participated in defined benefit plans. That number has dropped by 40 percent over the past 30 years. Money -Zine, Defined Benefit versus Contribution Plans, July 5, 2017, p. 2, <httr)s://www.monev-zine.com/financial- plannina/retirement/defined-benefit-versus-contribution-_plans/>. lss Nation, Pension Math 2011, p. 3, footnote 11. ls6 Interviews by Grand Jury. 187 Interviews by Grand Jury. 188 Keene, James, Palo Alto City Manager, Letter to Tamara L. Davis. 2017-2018 San Mateo County Civil Grand Jury 35